KOMMERSANT. At the beginning of this week largest Turkish private bank Turkiye Is Bankasi (Isbank) will announce the acquisition of a 100% interest in Russia’s Bank Sofia, several sources on the banking market told Kommersant. According to a source, the lender will be bought to serve Turkish companies operating in Russia that are customers of Turkiye Is Bankasi. On Friday in response to the business daily’s request Isbank answered that required information will be maid public once the transaction is closed, while Bank Sofia declined to comment.
According to the newspaper, Turkiye Is Bankasi was established in 1924 under the order of Mustafa Kemal Atatürk, the first president of the Turkish Republic. At present, the lending institution is one of the largest Turkish banks with state participation (28% of the bank are in the hands of the Republican People’s Party). The lender operates 1,067 divisions in Turkey and 14 branches abroad, including 11 branches in Germany, one branch in the Netherlands, France and Switzerland, and also a representative office in China. Based on its 2009 performance, the bank’s aggregate assets totaled $79.38 bln and net profit amounted to $1.6 bln.
The controlling interest in Bank Sofia (57.36%) is held by board chairman Nikolai Shutov. A 26.51% interest is in the hands of auto spare parts distributor Rabotek and Balakovorezinotechnika, a manufacturer of rubber, vibration and noise insulation items for the industrial sector, holds a 16.13% equity position.
In late December 2009 Isbank CEO Ersin Ozince voiced the aspiration to buy “a small bank in Russia”. Negotiations over Bank Sofia’s acquisition by the Turkish lender got under way this spring, and during the talks the interests of Bank Sofia were represented by UniCredit Securities, a source close to Bank Sofia said. UniCredit Securities declined to comment. The transaction price will be around 1.5x of the bank’s capital (as of September 1, 2010 the lender’s capital stood at Rub 803 mln), a Kommersant source went on to say. This is far lower than the pre-crisis level, as in 2006—2007 foreigners bought Russian banks at the price equaling three to four capitals. Initially the Turkish bank discussed the price at $50 mln (i.e. 2 capitals of the bank), but in the course of the negotiations the price tag was revised, the paper’s sources said.
Since autumn 2008 foreign strategic investors have not acquired controlling stakes on the Russian banking market. “It is evident that the M&A is back on a recovery path, but 2x of capital for the bank of this level is a high premium," deputy general director of rating agency Expert RA Pavel Samiev said adding the bank’s adequate valuation is about 1.5—1.6x of capital.
Experts believe the new player will hardly succeed in rolling out efficient business on the Russian market. Currently Credit Europe Bank, owned by Turkish holding FIBA Group, is the biggest among Turkish banks that operate in Russia. “Credit Europe Bank does business in the high-yield segment of consumer lending, which it entered at a good time, but even taking this into account it did not achieve a stellar performance,“ Interfax-CEA general director Mikhail Matovnikov said. Subsidiary banks of Turkey’s Yapi Ve Kredi Bankasi and Turkiye Garanti Bankasi also carry out business in Russia. “Although there are many Turkish businesses in Russia that operate largely in the construction sector, the scope of their business is not that large to secure profitability of several Turkish banks,” Absolut Bank management board chairman Evgeny Retyunsky noted adding that large companies such as Renaissance Construction prefer to deal with Russian banks. He specified that this is not convenient for foreign businesses operating in Russia to raise loans at the head bank, as their primary needs are local currency financing.
